Petitions Involving the Effective Dates of the Disclosure of Code-Sharing Arrangements and Long-Term Wet Leases Final Rule and the Disclosure of Change-of-Gauge Services Final Rule

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 257 and 258

[Docket Nos. OST-95-179, OST-95-623, and OST-95-177]

RIN: 2105-AC10, 2105-AC17

Petitions Involving the Effective Dates of the Disclosure of

Code-Sharing Arrangements and Long-Term Wet Leases Final Rule and the

Disclosure of Change-of-Gauge Services Final Rule

AGENCY: Office of the Secretary (OST), Transportation.

ACTION: Final rule and notice of proposed disposition of petitions.

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SUMMARY: Two new rules that the Department of Transportation adopted on

March 15, 1999, the Final Rule on Disclosure of Code-Sharing

Arrangements and Long-Term Wet Leases, 14 CFR part 257 (``Code-Share

Rule''), and the Final Rule on Disclosure of Change-of-Gauge Services,

14 CFR part 258 (``Change-of-Gauge Rule''), are both scheduled to go

into effect on July 13, 1999. These rules will enable consumers to make

informed choices about their air transportation and to travel without

undue confusion. We have received one petition requesting a waiver

until October 15, 1999, of the Code-Share Rule's requirement that the

transporting carrier's corporate and network names be disclosed. We

grant this petition. We have also received seven petitions requesting

delay of both rules' effective date, one to mid-October, 1999, and six

to March 15, 2000; one of these seeks an additional grace period until

September 15, 2000, for tour operators. These latter petitions cite

Computer Reservations Systems' (``CRSs'') and other information

systems' programming and software problems related to the year 2000

(``Y2K'') as justification for delaying the rules' effective date. We

are postponing the effective date of both rules until August 25, 1999,

and we are requesting comments on our tentative findings that those

parts of the rules that are not affected by CRS reprogramming should

take effect on August 25, that the effective date of those parts of the

rules that are affected by CRS reprogramming should be further

postponed until March 15, 2000, and that as a matter of discretion we

should refrain from enforcing both rules in their entirety against the

tour operators for an additional grace period of six months.

DATES: Effective Dates: The effective date of the rule adding 14 CFR

part 257 and removing 14 CFR 399.88, published at 64 FR 12838 on March

15, 1999, is delayed until August 25, 1999. The effective date of the

rule adding 14 CFR part 258, published at 64 FR 12854 on March 15,

1999, is delayed until August 25, 1999.

Comment Date: Comments on further delaying the effective date of

these rules, or particular provisions of these rules, must be received

by July 30, 1999 for consideration to be assured. Comments received

after that date will be considered to the extent practicable. If the

Department decides to further delay the effective date of these rules,

or particular provisions of these rules, it will publish a document in

the Federal Register announcing the new effective date.

ADDRESSES: Comments may be submitted by one of the following methods:

(1) By mail to the Docket Management Facility (OST-95-179, OST-95-

623, OST-95-177), U.S. Department of Transportation, Room PL-401, 400

Seventh St. SW, Washington, DC 20590-0001.

(2) By hand delivery to room PL-401 on the Plaza level of the

Nassif Building, 400 Seventh St. SW, Washington, DC, between 9 a.m. and

5 p.m., Monday through Friday, except Federal holidays. The telephone

number is 202-366-9329.

(3) By fax to Docket Management Facility at 202-366-2251.

(4) Electronically through the Web Site for the Docket Management

System at http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: Betsy L. Wolf, Senior Trial Attorney,

Office of Aviation Enforcement and Proceedings (202-366-9359), Office

of the General Counsel, U.S. Department of Transportation, 400 Seventh

Street, SW, Washington, DC 20590.

SUPPLEMENTARY INFORMATION:

Background

On March 15, 1999, the Department issued two new rules under 49

U.S.C. 41712, our authority to prohibit unfair and deceptive practices

and unfair methods of competition. These rules will protect consumers

of air transportation in two ways: by ensuring that they are told what

kind of service they are considering before they decide to buy it and

by giving them written information that will help them avoid confusion

and other mishaps in the course of their transportation. Among other

things, the Code-Share Rule requires air carriers involved in code-

sharing arrangements or long-term wet leases to identify these

arrangements in the written or electronic schedule information they

provide to the public, in the Official Airline Guide (``OAG'') and

comparable publications, and in CRSs with an asterisk or comparable

mark and to disclose the transporting carrier's corporate name and any

other name under which the service is held out to the public. The rule

also requires air carriers and ticket agents to disclose this same

information orally to prospective passengers before booking

transportation, and it requires these sellers to provide this

information in a written notice once a consumer has booked a flight

involving a code-share arrangement or a long-term wet lease.\1\ The

Change-of-Gauge rule has

[[Page 38112]]

comparable requirements for service with one flight number that

requires a change of aircraft en route. For many if not most carriers

and for all ticket agents, the ability to comply fully with these

requirements hinges on the ability of the CRSs both to display all of

the relevant information and to print it as the required written

notice.

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\1\ In the interest of clarity and brevity, in the remainder of

this notice, we refer in most instances to the disclosures that the

Code-Share Rule specifically requires and that are not specifically

required under existing law or policy--namely, disclosure of the

transporting carrier's corporate name and any other name under which

a code-share or long-term wet-lease service is held out to the

public--as ``the new code-share and long-term wet-lease

disclosures.''

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Requests for Postponement

On April 29, 1999, American Airlines, Inc., American Eagle

Airlines, Inc., and Executive Airlines, inc. d/b/a American Eagle

(collectively, ``American'') requested a waiver of the Code-Share Rule

until October 15, 1999 for disclosure of Executive's corporate name.

American is in the process of merging Executive into AMR Corporation,

American's parent company. When the merger is complete, Executive will

surrender its certificate of public convenience and necessity and

conduct all further operations as American Eagle. American expects to

complete the merger by October 15 and asked for a waiver in order to

avoid the time and expense of reprogramming software to comply with the

rule in the short time remaining before then after the rule takes

effect. Under these circumstances, we agree with American that

compliance with the rule would be unreasonably burdensome, so we grant

its petition with regard to Executive.

On May 4, Midwest Express Airlines requested a 90-day extension of

the effective dates of both rules, claiming that the CRS enhancements

that it has ordered from SABRE will not be ready by July 13. Similarly,

on May 24, the Air Transport Association of America, Inc. (``ATA'')

filed a petition asking the Department to postpone the rules' effective

date until March 15, 2000. ATA stated that its member carriers and the

CRSs have been working to reprogram and reconfigure their various

information systems to be able to comply with both rules by July 13,

but they have found this task, which requires coordination among all

affected entities, more complex and time-consuming than they had

anticipated. ATA stated that these efforts are coinciding unavoidably

with the industry's commitment of considerable information services

resources to ``pressing Y2K needs.'' With Y2K commanding the highest

priority, ATA reported that ``many industry information services are

planning to `lock down' their systems early in the fourth quarter of

1999 and until after leap year day 2000.''

ATA's petition drew supporting answers from the OAG, Aeropostal

Alas de Venezuela, C.A., The SABRE Group, and EDS. The SABRE Group,

which operates the SABRE CRS, stated that SABRE also serves as the

internal reservation system of over 50 domestic and international

carriers. Claiming that SABRE, like every other technology system, is

``working diligently to avoid any problems associated with the [Y2K]

issue,'' The SABRE Group confirmed that SABRE intends to impose a

freeze, during which it will permit no new implementations of any kind,

from November 1, 1999, to early in March of 2000. EDS, which operates

the SHARES computer systems to provide hosting services to multiple

domestic and international air carriers, states that it will be

imposing a similar freeze from November 1, 1999, through the end of

January.

On June 14, the United States Tour Operators Association, Inc.

(``USTOA'') filed a petition asking not only for an extension of both

rules' effective date until March 15, 2000, in support of ATA's

petition, but also for a grace period for tour operators of another six

months--i.e., until September 15, 2000. USTOA agreed with ATA that much

work remains to be done by the air carriers and CRSs before the former

will be able to comply with the rules and that Y2K issues should take

top priority. USTOA stated that tour operators use CRSs as a source of

information for their own ```front-end information systems','' which

``are extensive and complex because they include functionality to book

air, along with hotel, rental car, airport transfers, dining,

sightseeing activities, compute total retail price, print out itinerary

and pay vendors.'' According to USTOA, tour operators will need to

reprogram these front-end information systems in order to comply with

both rules, and this endeavor will in turn entail ``knowing the

specifications set by the originators of the information--the airlines

and CRSs.'' USTOA requested an additional six-month grace period for

tour operators to reprogram their own systems.

On June 25, four foreign carriers, AVIATECA, S.A., LACSA Airlines,

TACA International Airlines, S.A., and NICARAGUENSE DE AVIACION,

requested an extension of the rules' effective date until March 15,

2000. These carriers are multi-hosted in SABRE, which, as noted, has

announced that it will not be able to provide the requisite

enhancements to enable these carriers to comply with the rules as of

July 13.\2\

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\2\ On May 25, Aer Lingus Limited (``Aer Lingus'') requested a

temporary waiver of the Code-Share Rule until October 31, 1999, for

reasons unrelated to the issues raised by the other parties. We have

disposed of Aer Lingus's request elsewhere.

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The Department's Concerns

We recognize that it is critical that information systems in the

air transportation industry be prepared to continue functioning

normally through the end of the 20th century and into the 21st. The

Department has actively sought to avoid imposing any substantial

information burdens on the industry that would interfere with its

ability to become Y2K-compliant. In fact, when we adopted the two rules

at issue here in March, all information available to us indicated that

the CRSs and major airline reservations systems were or would be Y2K

compliant. We had attempted to gauge the rules' effect on Y2K

compliance by reviewing statements from Annual Reports, 10-K and 10-Q

Statements filed with the Securities and Exchange Commission, news

reports, press releases, and other documents of the four CRSs, the nine

largest U.S. air carriers, and other relevant entities. While

recognizing that there could be no guarantees, we found that most

entities expected to be Y2K compliant on time and had made contingency

plans to use in the event that they are not. We concluded that the

public interest would best be served by issuing the rules in March and

making them effective in July rather than waiting until next year,

because the need for effective disclosure has been pressing and is

likely to increase as air carriers' relationships and operations grow

ever more complex. See 64 Fed. Reg. 12838, 12850-12851 (March 15, 1999)

(Code-Share Rule) and 64 Fed. Reg. 12854, 12859 (March 15, 1999)

(Change-of-Gauge Rule).

Because of the rules' implications for consumer welfare and because

the technological problems suggested by the parties do not apply to all

parts of the new rules, we concluded initially that the public interest

would not be served by extending the effective date for both rules in

their entirety until March 15, 2000. Without more detailed and concrete

information from the parties, however, we could not make an informed

decision on which parts of the rules might have to be postponed or for

how long. We believed that Y2K compliance might no longer be an issue

for the entire industry; we knew that sellers and providers of air

transportation could comply with some parts of the rule without any

reprogramming by the CRSs. The rules do add several new disclosure

requirements, including requiring ticket agents as well as air carriers

to provide

[[Page 38113]]

both oral and written notice of code-sharing arrangements and change-

of-gauge services, but they also retain and consolidate existing

disclosure requirements that already apply to air carriers.\3\ Several

of the new requirements do require reprogramming on the part of the

CRSs: the new code-share and long-term wet-lease disclosures in

schedules, the OAGs, and the CRSs, these same disclosures via oral

notice to consumers before booking transportation, these same

disclosures via written notice to purchasers, and a generic written

notice of change-of-gauge services to purchasers. CRS reprogramming

does not come into play for the Code-Share Rule's advertising

requirement. Furthermore, CRS listings already indicate code-share

services and change-of-gauge services, so travel agents are able now to

comply with existing oral disclosure requirements that apply only to

air carriers.\4\

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\3\ The Department's policy on airline designator code-sharing,

14 CFR Sec. 399.88, requires air carriers to give reasonable and

timely disclosure of code-sharing arrangements by identifying them

in schedules given to the public, the OAG, and CRSs, by disclosing

them in discussions with consumers, and by providing frequent,

periodic notice of them in advertisements. The Department's orders

approving code-sharing arrangements involving foreign air carriers

apply these same requirements to the foreign carriers. See, e.g.,

Order 94-5-31. As for change-of-gauge service, the Department's CRS

rules, 14 CFR Sec. 255.4(b)(2), require that CRS displays give

notice of any flight that involves a change of aircraft en route,

and we require as a matter of policy that carriers give consumers

notice of aircraft changes for change-of-gauge flights. See Order

89-1-31 at 5.

\4\ USTOA's members are not able at present to comply with these

requirements, as discussed below.

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Additional Information from Interested Parties

Because of our need to resolve these issues quickly and craft a

solution that both accommodates legitimate Y2K concerns and allows only

those delays to the rules' consumer benefits that are unavoidable, we

met with interested parties at the Department on Tuesday, June 29.\5\

Those in attendance gave us more detailed information than the parties

had provided in their pleadings on how Y2K compliance issues relate to

compliance with the rules, on why CRSs cannot be reprogrammed to allow

all parties to comply with the new rules in their entirety by July 13,

and on why the parties need until March of next year (and, in the case

of USTOA, an additional six months) to be ready to comply. The

following five paragraphs contain the gist of this information.

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\5\ Specifically, the Acting Assistant Secretary for Aviation

and International Affairs, the General Counsel, and Department staff

met with representatives from ATA, American, Continental, Delta,

Midwest Express, Northwest, TWA, US Airways, Aeropostal, Canadian,

OAG, and SABRE.

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First, for air carriers and ticket agents to comply with the rules'

new requirements, the CRSs must be reprogrammed (1) to allow carriers

to input the new code-share and long-term wet-lease disclosures, (2) to

display all of this information on screens viewed by travel agents, and

(3) to print both these new disclosures and the generic written

disclosure required for change-of-gauge services. Additionally, OAG

must make changes to be able to assimilate and list all of the new

information from air carriers, and carriers themselves have

reprogramming work to do to be able, among other things, to provide

written notice of code-share services, long-term wet leases, and

change-of-gauge services at airports when this notice is not sent to

passengers earlier along with a ticket or itinerary. USTOA's members

sell tour packages, mostly through travel agents but in some cases

directly to the public; they cannot begin to reprogram their own front-

end information systems until after the CRSs have completed their

reprogramming.

Second, the CRSs cannot accomplish all of the reprogramming they

must do by July 13.\6\ To ingest, process, display, and dispense all of

the additional information the new rules require, the CRSs must more

than double the size of their existing data fields, from 19 characters

to 39 characters. This task requires massive reprogramming, consuming

considerable resources for considerable amounts of time, and is further

complicated by the need for a standard, industry-wide solution.

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\6\ Although only SABRE has commented on the record and sent

representatives to the meeting, the parties confirmed that the other

CRSs are situated similarly.

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Third, the CRSs, the other information systems, and the carriers

initially failed to apprehend the enormity of the task before them.

Meanwhile, as Y2K looms ever larger, the information systems are all

imposing freezes on new implementations from November through at least

the beginning of next year. They will use the initial months of these

freezes to arrange things so that they can quickly identify, analyze,

and fix any problems that may arise during the transition to the next

century. They do not have unlimited resources. Therefore, not only can

they not possibly finish the reprogramming required by the Code-Share

and Change-of-Gauge Rules by July 13, but they deem it highly unlikely

that they will be able to finish, test, and implement this

reprogramming before their freezes commence in November even though

they will continue their good-faith efforts.

Fourth, while the reprogramming necessary for the new code-share

and long-term wet-lease disclosures plus the generic written notice of

change-of-gauge services constitute the barrier to compliance with both

new rules in their entirety by July 13, CRS displays do already

indicate code-share service and identify the transporting carrier, and

they do already indicate change-of-gauge service. Virtually all travel

agents now use CRSs to book transportation and issue tickets.

Therefore, with the exception of USTOA's members discussed below,

ticket agents \7\ should already be able to comply with the oral

disclosure requirements currently in effect for air carriers and

foreign air carriers.

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\7\ As a technical matter, both rules apply to ticket agents as

that term is defined in 49 U.S.C. 40102 (40): a ticket agent is ``a

person (except an air carrier, a foreign air carrier, or an employee

of an air carrier or foreign air carrier) that as a principal or

agent sells, offers for sale, negotiates for, or holds itself out as

selling, providing, or arranging for, air transportation.'' Thus,

all travel agents are ticket agents, but not all ticket agents are

travel agents.

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Fifth, USTOA's members are tour operators. They do most of their

business through travel agents, but they do have some direct dealings

with consumers. Unlike conventional travel agents, they use their own

front-end systems rather than CRSs, as noted. Not only will they need

six months after the CRSs are reprogrammed to reprogram their own

systems to display and process all of the information required for

compliance with the two rules, as also noted, but unlike the CRSs,

these systems do not currently indicate code-share service, identify

the transporting carrier, or indicate change-of-gauge service.

Therefore, unlike conventional travel agents, USTOA's members are not

already able to comply with the oral disclosure requirements currently

in effect for carriers.

Disposition

On the one hand, the parties have satisfied us that they cannot

comply with the two rules in their entirety by July 13 and will not be

able to comply before the information systems' freezes on

implementation take effect in November. Moreover, we must continue to

take care not to impose information burdens on the industry that could

interfere with Y2K compliance. On the other hand, the rules will give

consumers information that is of critical importance to them in making

informed decisions about their travel purchases and in avoiding

problems during travel.

[[Page 38114]]

Compliance with some parts of the rules does not require any CRS

reprogramming. For example, travel agents, who still sell most air

transportation, are in a position to begin providing some of this

information by complying with the oral disclosure portions of the rules

that already apply to carriers. We have therefore tentatively decided

to dispose of the requests for postponement by granting them only

insofar as necessary--i.e., by only postponing the effective date until

March 15, 2000, for those parts of the rules with which carriers and

ticket agents cannot fully comply until the CRSs have completed their

reprogramming, as specified below. To this end, we are postponing the

effective date of both rules until August 25, 1999, and giving

interested parties fifteen days to submit comments on our tentative

findings and the actions they contemplate. We will issue a final notice

on or before August 25.

Accordingly, this document postpones the effective date of the

Code-Sharing Rule, 14 CFR part 257, the Change-of-Gauge Rule, 14 CFR

part 258, and the removal of 14 CFR 399.88, until August 25, 1999.

This document also invites comment on whether the effective date of

certain parts of the rule should be further extended. In this regard,

based on the petitions and public input received since parts 257 and

258 were adopted, the Department believes that the effective date of

the following parts of the Code-Share Rule should not be further

postponed:

Sec. 257.1 Purpose.

Sec. 257.2 Applicability.

Sec. 257.3 Definitions.

Sec. 257.4 Unfair and deceptive practice.

Sec. 257.5 Notice requirement.

(b) Oral notice to prospective consumers, but only insofar as

compliance with this section does not require reprogramming by

CRSs.\8\

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\8\In other words, carriers, which are currently required to

disclose code-share and change-of-gauge services in discussions with

consumers, would be required as of August 25 to make these

disclosures before booking transportation, and the same requirements

would apply to travel agents. The new code-share and long-term wet-

lease disclosures would not be required at this time.

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(d) Advertising.

Similarly, the Department believes the effective date of the

following parts of the Change-of-Gauge Rule should not be further

postponed:

Sec. 258.1 Purpose.

Sec. 258.2 Applicability.

Sec. 258.3 Definitions.

Sec. 258.4 Unfair and deceptive practice.

Sec. 258.5 Notice requirement.

(a) Notice in schedules.

(b) Oral notice to prospective consumers.

However, if the Department views are not altered by the comments we

are inviting here, the Department will take further action by August

25, 1999, to postpone the effective date of the following parts of the

Code-Share Rule until March 15, 2000:

Sec. 257.5 Notice requirement.

(a) Notice in schedules.

(b) Oral notice to prospective consumers, except as specified in

paragraph (1).

(c) Written notice.\9\

\9\ It is our understanding that carriers are already complying

with those parts of the schedule notice requirement that go beyond

14 CFR 257.5(a) and the oral notice requirement imposes no new

requirement on carriers.

Similarly, we would postpone the effective date of the following

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part of the Change-of-Gauge Rule until March 15, 2000:

Sec. 257.5 Notice requirement.

(c) Written notice.

Finally, we believe that USTOA has shown good cause for the

Department to refrain as a matter of discretion from enforcing both

rules in their entirety against tour operators until six months after

March 15, 2000.\10\

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\10\ We tentatively find that imposing the same requirements on

tour operators that those parts of the rules that are to take effect

on August 25 will impose on travel agents would burden the tour

operators excessively by forcing them to reprogram their front-end

systems not once but twice.

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In closing, we strongly encourage the CRSs and other information

systems to proceed with their reprogramming efforts with all possible

expedition. Any affected parties that can comply with the rules before

they become effective should do so. For example, while we are

tentatively agreeing to postpone the effective date of both rules'

written notice requirements, we are aware that some carriers and some

travel agents are already disclosing much of the required information

in the itineraries they provide to passengers, and we encourage all

sellers of air transportation to do so who have the capability.

Regulatory Analyses and Notices

The Department has determined that this action is not an

economically significant regulatory action under Executive Order 12866

or the Department's Regulatory Policies and Procedures, and it has not

been reviewed by the Office of Management and Budget. This rule is

significant under the Department's Regulatory Policies and Procedures

because of congressional and public interest. The rule does not impose

unfunded mandates or requirements that will have any effect on the

quality of the human environment. A summary of the regulatory analyses

of the rules whose effective date is being extended here was published

at 64 FR 12850-12851 and 12859, March 15, 1999. Also published there

were discussions of the rules' effects on small businesses and their

Federalism and Paperwork Reduction Act implications. Apart for the Y2K

implications recently brought to light and addressed above, the

determinations made previously are not significantly affected by the

limited extensions of the effective date made and proposed here.

Authority: 49 U.S.C. 41712.

Issued in Washington, DC on July 9, 1999, under authority

delegated by 49 CFR 1.56a(h)2.

A. Bradley Mims,

Acting Assistant Secretary for Aviation and International Affairs.

[FR Doc. 99-17963 Filed 7-14-99; 8:45 am]

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